Charlie Munger once said: ".My goal is not to make a lot of money. All I want is independence
Independence has always been a personal financial goal for me.
I don't have much interest in pursuing the highest ROI or living a lavish life by investing. Both of these goals look like games to be played to show off in front of friends, and both have potential risks.
I just want to wake up every morning knowing that we can do whatever we want as a family. Every financial decision we make is geared towards achieving this goal
My parents' experiences as adults can be divided into two stages: destitute and affluent. My father only became a doctor when he was 40 years old, and he already had three children. Receiving a steady salary as a doctor didn't change the frugality he was forced to develop while attending medical school while supporting three of his children. During those years, my parents lived an extremely simple life, saving a large part of their income, which brought a certain degree of autonomy to their lives. My dad was an emergency room doctor – one of the most stressful careers I could think of – and his frequent shift work required him to frequently reverse his schedule, which took a heavy toll on his body. After 20 years, he decided he had done enough for the job, so he stopped and quit. Then, he moved on to the next stage of his life.
This affected me deeply. Whenever you want to change, you can wake up one morning and change your current lifestyle as you like, which may be the ultimate goal of any financial plan
For me, autonomy doesn't mean that I don't work anymore, but that I can do what I like when I like and with the people I like, and I can do it for as long as I want.
Gaining a degree of autonomy doesn't require you to be paid as much as a doctor. The main secret is to control your desires and live as frugally as you can be.
Autonomy is not related to your income level, but is determined by your savings rate. And when your income exceeds a certain level, your savings rate is determined by controlling your desires for lifestyle.
My wife and I met in college. We lived together a few years before we got married. After class, we will go to do some junior part-time jobs, get a relatively low salary, and live a decent life.
The way of life of human beings is all within the range of a spectrum, thereforeWhat is seen as a decent life in one person's eyes may be unattainable or impoverished for another。However, we bought an apartment, a car, clothes and food that was decent for our income. Our lives are comfortable, but they have nothing to do with luxury.
Even though our incomes have been growing for more than a decade — I work in finance, my wife works in health care — we've more or less stayed the way we used to live. This has led to an upward movement in our savings rate. In fact, every dollar of income we grow goes into savings – our "autonomy**" and our current standard of living is much lower than our income level, so the former does not reflect the latter, but more of the lifestyle decisions we established in our 20s.
If there's one part of my family plan that I'm proud of, it's that we decided at a young ageOur lifestyle desires don't rise with income。Our savings rate is quite high, but we seldom feel that this frugality is achieved by suppressing desires, because our material desires have not risen much with it. That's not to say we don't have desires. We also like good things and a comfortable life. We just don't let the purpose of life swell inflated indefinitely.
This mentality does not apply to everyone, because we both agree with it as a husband and wife, and neither of us compromises with each other. Most of the entertainment in our lives – walking, reading, listening to podcasts – doesn't cost much money, so we rarely feel like we're missing out on anything. Occasionally, when I question whether our savings rate is too high, the thought of how my parents gained freedom and independence in life through years of high savings rates quickly dispels my doubts and returns to my roots.
Autonomy is our highest goal
The added benefit of maintaining a lifestyle that is less than you can afford is that it prevents you from having a comparison mentality.
Living comfortably within what you can afford, without generating too many desires, you will avoid the enormous social pressures that many in the modern Western world are subjected to.
Nassim Taleb explained: ".Exit from needless competition and regulate your behavior with the goal of gaining inner peace is the real success。"I love that quote.
So far, some of the behaviors that my family has taken to achieve the goal of an autonomous life are even theoretically unreasonable. Instead of taking out a loan, we bought the house in full. It was the worst decision we've ever made from a financial point of view, but it was the best decision from a money point of view. When we buy a house, mortgage interest rates are ridiculously low, and any rational advisor would recommend that you take advantage of this low interest rate and put your excess savings into high-return financial assets, such as buying**. But our financial goals have nothing to do with cold rationality, but with psychological stability.
It's true that if we choose a mortgage with a low interest rate, we can invest the extra money and thus make a lot of financial gains, but the sense of autonomy of owning a property far outweighs the satisfaction of monetary gains. Rather than maximizing the long-term returns on our financial assets, the option of not having to repay the loan every month makes us feel better because it makes me feel independent and free.
If you feel that this decision has merit, or would never make such a choice, I don't mean to convince you. Our choice is not the best in theory, but it suits us, we like it, and that's what matters.
Good decisions are not always rational. At some point, you have to choose between being "right" and being happy
The percentage of liquidity in our financial assets is higher than recommended by most financial advisors, at approximately 20% (after net of property value). It's not a wise choice in theory, and I wouldn't recommend it to anyone else, but it's for us.
We do this because cash is an important guarantee for independent living, and more importantly, we never want to be forced to hold what we have. We want to reduce the likelihood of having to sell** to make money when faced with a huge expense. This may simply be because our risk tolerance is lower than others'.
But with all I know about personal finance,Everyone, without exception, will one day face an unexpectedly large expense。They didn't plan for these expenses because they didn't expect them to happen. The few people who know the details of my family's finances will ask us, "What are you saving money for?"A house?A ship?A car?"No, neither. We areSave money to live well in a world where accidents happen more often than we thinkTarget. Not having to be forced to sell** in the face of unexpected expenses also means that we are more likely to hold on** for a long time, so we can enjoy the benefits of compounding.
Charlie Munger said: ".The first rule of compound interest is: never interrupt the process unless absolutely necessary
.Excerpt from The Psychology of Money